The Kroger Co. (KR): Business Model Canvas [Dec-2025 Updated]

You're trying to make sense of The Kroger Co.'s game plan now that the Albertsons merger is off the table, and honestly, the underlying business is still a behemoth worth dissecting. As someone who has mapped out balance sheets for two decades, I can tell you their current model-running over 2,700 stores while investing $3.6 billion to $3.8 billion in CapEx for 2025-is all about balancing physical scale with digital necessity. We need to look past the recent $2.6 billion impairment charge they took on their automated fulfillment network and see the core engine driving their FY 2025 EPS guidance of $4.75 to $4.80; it's a hybrid strategy built on loyalty data and private brands. Their next move is everything. Dive into the canvas below to see the nine blocks defining their reality right now.

The Kroger Co. (KR) - Canvas Business Model: Key Partnerships

You're looking at the Key Partnerships for The Kroger Co. (KR) as of late 2025, and honestly, the landscape has shifted dramatically, especially around fulfillment. The big story is the pivot away from the large, centralized automated fulfillment centers (CFCs).

The relationship with Ocado Group, the technology partner for automated fulfillment, has seen a major restructuring. Kroger determined that the existing CFCs, built under the original plan for 20 locations, were not meeting success benchmarks due to location and volume issues. This led to a significant financial event: Kroger announced it would close three of the eight operational CFCs, resulting in a $2.6 billion impairment charge in the third quarter of fiscal 2025. As part of unwinding these arrangements, The Kroger Co. determined the impairment and related charges include a cash payment to Ocado of approximately $350 million, due in January 2026. Still, Kroger is monitoring the five remaining facilities and has a new one planned for Phoenix, Arizona, expected to open in 2026. The company expects these closures to improve e-commerce operating profit by $400 million in 2026.

This pivot directly fuels the expansion of last-mile delivery partners. Kroger is deepening its reliance on a decentralized, store-based fulfillment model, which means more work for the gig economy platforms:

• Instacart: Remains the primary delivery fulfillment partner for Kroger.com orders.
• DoorDash: Expanded its relationship to include fresh foods and household goods, moving beyond previous limited selections.
• Uber Eats: Kroger will form its first partnership with Uber Eats Marketplace starting in early 2026.

The shift is about speed and cost. These partners use a decentralized network of stores and on-demand couriers, which Kroger believes is the preferred route to keep pace with rapid delivery firms.

The data science and advertising side relies on strong tech alliances. Kroger Precision Marketing (KPM), powered by 84.51° data science, is central to collaborating with CPG Suppliers. Digital Commerce 360 projects that Kroger online sales will reach $19.98 billion in 2025, providing a massive dataset for KPM. KPM aims to streamline how brands use Kroger's purchase data for personalization and media buying.

For core technology infrastructure, The Kroger Co. maintains strategic tech partnerships:

These tech partners support Kroger's overall digital strategy, which spans AI, cloud computing, and autonomous delivery across its approximately 2,700 stores.

Finance: draft Q4 2025 cash flow impact analysis from the Ocado settlement by next Tuesday.

The Kroger Co. (KR) - Canvas Business Model: Key Activities

The Key Activities for The Kroger Co. as of late 2025 center on maintaining physical scale while aggressively pivoting the digital and private label components of the business.

Operating over 2,700 supermarkets across the U.S.

The Kroger Co. maintains a vast physical footprint, which serves as the core of its operations and a key component of its hybrid fulfillment strategy. As of November 18, 2025, there are 2,870 Kroger Company stores in the United States. This network includes stores operating under various banners like Ralphs, King Soopers, and Fred Meyer. For context, as of May 2025, the company was reported to operate 2,750 stores. The company also plans to accelerate capital investment in new stores beyond 2025.

Managing a complex, hybrid e-commerce fulfillment network

The Kroger Co. is actively managing and reshaping its e-commerce fulfillment approach, moving toward a 'flexible, hybrid network' that balances store fulfillment, third-party delivery, and automation. This involved a strategic review that led to the closure of three of its eight robotics-powered fulfillment centers in January 2026 (Groveland, Florida, Pleasant Prairie, Wisconsin, and Frederick, Maryland). The company is expanding relationships with third-party delivery providers such as Instacart, DoorDash, and Uber Eats to reach customers in as little as 30 minutes. eCommerce sales growth was impressive, increasing 17% year over year in the third quarter of fiscal 2025. The company expects these updates to improve eCommerce operating profit by approximately $400 million in 2026 and anticipates the channel will become profitable in 2026.

Developing and marketing the high-margin 'Our Brands' private label portfolio

The 'Our Brands' portfolio is a critical differentiator and a noted 'margin enhancer' for The Kroger Co.. The company is executing an aggressive expansion, aiming to launch more than 900 new private label items in 2025. This focus is yielding results, with the gross profit ratio for the fiscal year 2025 reported at 22.7%. The success is broad-based; in 2024, more than 90% of customer households purchased items from the 'Our Brands' portfolio. As of March 2025, these retailer-owned brands were generating $30 billion in annual sales.

The key operational metrics and financial targets related to these activities include:

Optimizing supply chain and logistics for fresh food distribution

Supply chain efficiency is a direct contributor to margin performance. Improvements in the supply chain, alongside lower shrink, helped drive gross margin higher in Q3 2025. The company is focused on cost structure improvements across its operations, from stores to support centers.

Executing the $3.6 billion to $3.8 billion in planned capital expenditures for FY 2025

The Kroger Co. reaffirmed its commitment to investing in the business through its capital plan. The planned capital expenditures for Fiscal Year 2025 are set in the range of $3.6 billion to $3.8 billion. This investment supports store development, including plans to break ground on 14 new stores in the fourth quarter of 2025. The company expects to complete the remaining $2.5 billion in open market share repurchases by the end of fiscal 2025.

• The Kroger Co. operates 32 food manufacturing facilities.
• The company operates more than 1,700 fuel centers.
• The company operates 2,270 pharmacies.
• The company operates 225 The Little Clinic in-store medical clinics.

The Kroger Co. (KR) - Canvas Business Model: Key Resources

The Kroger Co. relies on several substantial, tangible, and intangible assets to execute its grocery retail and omnichannel strategy as of late 2025.

Extensive real estate footprint and store network

The physical presence remains a core asset, providing both sales locations and fulfillment nodes. As of November 18, 2025, The Kroger Co. operated 2,870 stores across the United States. This network spans 36 States and Territories.

The scale of the physical network is detailed below:

'Our Brands' private label portfolio, including Simple Truth and Private Selection

The private label portfolio is a significant driver of margin improvement. For fiscal year 2025, the sales target for the 'Our Brands' portfolio was $31 billion. The strength of these products directly impacted profitability in Q3 2025.

• Our Brands performance contributed to a 49 basis points increase in the FIFO gross margin rate in Q3 2025.
• In Q1 2025, Our Brands accounted for 35% of total sales.
• The portfolio was valued at $37 billion in Q1 2025.

Massive customer data from the Kroger Plus Card loyalty program

Data generated through the loyalty program is monetized through the precision marketing division, which is a substantial source of alternative profit. The program underpins the majority of transactions.

• The Kroger Plus Card program tracks an estimated 63 million loyalty program members.
• 95% of customer transactions are loyalty-based.
• The precision marketing arm generated an estimated $527 million in revenue last year (2024).
• These alternative profit ventures now account for more than 35% of The Kroger Co.'s net income.

Digital infrastructure supporting e-commerce sales growth

Digital capabilities are a key growth engine, showing strong recent performance and a clear path to profitability.

Human capital: Over 400,000 associates

The workforce is a critical operational resource, supporting both physical stores and digital fulfillment.

• The Kroger Co. has more than 400,000 associates across its family of companies as of Q2 2025.
• These associates serve over 11 million customers daily.
• The company announced plans to hire over 18,000 associates in October 2025.

Finance: draft 13-week cash view by Friday.

The Kroger Co. (KR) - Canvas Business Model: Value Propositions

You're looking at how The Kroger Co. (KR) delivers distinct value to its customers as of late 2025. It's about balancing price, quality, and modern shopping methods in a tight consumer environment.

Fresh, affordable food through a wide selection of national and private brands

The core value proposition centers on providing quality food at competitive prices. The company is leaning heavily into its private label assortment, branded as Our Brands, to drive both value perception and margin improvement. This strategy is working; Our Brands accounted for 35% of total sales in the first quarter of fiscal 2025. The Kroger Co.'s private label division is a massive operation, valued at $37 billion as of the first quarter of 2025. To directly combat consumer pullback, The Kroger Co. has aggressively lowered prices on more than 3,500 grocery items this year, up from an initial target of about 2,000 price cuts announced earlier in 2025. The premium lines, like Simple Truth and Private Selection, were specifically called out as the strongest performers during the third quarter of 2025. This focus on value is reflected in the underlying sales momentum; identical sales without fuel grew 3.2% in Q1 2025 and 3.4% in Q2 2025, leading to a narrowed full-year guidance for identical sales without fuel growth of 2.8% to 3%.

Omnichannel convenience: Pickup, delivery, and in-store shopping options

The Kroger Co. is making sure you can shop how you want, whether that's walking into a store or ordering digitally. The digital business continues to show impressive growth, which is key to serving modern shoppers. In the third quarter of 2025, eCommerce sales jumped 17% year-over-year, following a 16% increase in the second quarter. This digital strength is building on an established base, with digital sales already exceeding $13 billion annually around the start of 2025. The company is actively building out the infrastructure to support this, planning to expand pickup and delivery capabilities at over 200+ locations throughout 2025. You can expect this channel to become even more profitable soon; The Kroger Co. expects its eCommerce business to achieve profitability in 2026. Overall, The Kroger Co. has over 400,000 associates serving more than 11 million customers daily across its combined store and digital experience.

Fuel savings and personalized discounts via the loyalty program

The Kroger Plus loyalty program is designed to lock in your regular grocery spend by offering tangible savings where you already spend money-at the pump. You earn 1 Fuel Point for every $1 you spend across qualifying purchases, whether you shop in-store or use pickup or delivery. Even if you don't have points to redeem at a Kroger Family of Stores Fuel Center, you still get a discount of 3₵ off per gallon just for scanning your Shopper's Card. The company has been expanding its physical footprint to support this, having opened its 1,700th fuel center earlier in 2025. However, the fuel business itself is currently a headwind to overall sales, with the combined retail fuel market share slipping to 4.65% in the second quarter of 2025 from 4.83% in the same period of 2024.

Quality and value from premium private labels like Simple Truth

This value proposition is intertwined with the affordable food offering, focusing on quality perception. The Simple Truth Organic® and Simple Truth Natural® lines are central to this. For instance, The Kroger Co. is working to achieve specific animal welfare standards for at least 50% of the supply for these fresh chicken lines by 2025. The success of these premium brands directly impacts the bottom line, as management noted that Our Brands performance contributed to a gross margin rate improvement of 49 basis points in the third quarter of 2025 (FIFO rate, excluding certain items) compared to the prior year.

Pharmacy and health services integrated into the grocery experience

Health services provide a necessary, high-frequency touchpoint that complements the grocery trip. The pharmacy business remains a strong sales driver. In the third quarter of 2025, Kroger Specialty Pharmacy sales were reported at $387 million. This compares to $718 million in the second quarter of 2025. The growth in the core pharmacy business, fueled by scripts and GLP-1 medications, was a key factor in the company raising its full-year adjusted earnings per share guidance to a range of $4.75 to $4.80 for fiscal 2025.

Here's a quick look at some key metrics supporting these value drivers:

The underlying operational improvements are also part of the value delivered, as shown by the gross margin performance:

• FIFO Gross Margin Rate (excl. rent, D&A, fuel) increased 49 basis points in Q3 2025 versus prior year.
• This improvement was driven by Our Brands performance, lower supply chain costs, and lower shrink.
• The company expects to complete the remaining $2.5 billion of its share repurchase authorization by the end of fiscal 2025.

The Kroger Co. (KR) - Canvas Business Model: Customer Relationships

The relationship The Kroger Co. maintains with its vast customer base is a complex blend of high-tech personalization and necessary in-person transactions. This segment of the Business Model Canvas is heavily influenced by the retailer's scale and its aggressive push into digital commerce, which saw digital sales increase by an impressive 17% year over year in the third quarter of 2025.

Highly personalized engagement via the Kroger Plus loyalty card data

The Kroger Plus loyalty program is the foundation for personalized engagement, underpinning the data strategy that drives value for both the customer and The Kroger Co. As of late 2025, The Kroger Co. reports serving over 11 million customers daily across its store and eCommerce experience. This massive data stream fuels Kroger Precision Marketing, allowing for highly relevant offers. For instance, customers can load up to 150 digital coupons, which apply automatically across all shopping channels. Furthermore, the fuel rewards component of the Kroger Plus program remains a key loyalty driver, as fuel sales are an important part of the overall strategy. The success of value-driven loyalty is also reflected in the private label penetration, which accounted for about 27% of retail sales before fuel as of September 2025.

• Paid membership, Boost by Kroger Plus, offers benefits like double fuel points.
• Digital coupons can be clipped up to 150 times for use in-store, pickup, or delivery.
• The company is focused on leveraging data to deliver more effective promotions and relevant product recommendations.

Dedicated customer service for digital order fulfillment and issues

As digital sales continue their double-digit growth trajectory, dedicated service for online fulfillment is critical. The Kroger Co. is actively managing this relationship by focusing on speed and reliability. The company noted sequential improvements in pickup and delivery performance during the second quarter of 2025. Internally, composite scores measuring key metrics, including customer service, are showing steady improvement as of Q3 2025. The shift to a hybrid fulfillment model, leveraging store-based picking, is intended to improve the customer experience and profitability. For example, the early results from the DoorDash partnership included fulfilling 1 million orders in its first month alone.

Transactional relationships for in-store, self-service purchases

Despite the digital focus, the core relationship remains transactional within the physical store footprint. As of February 1, 2025, The Kroger Co. operated 2,731 supermarkets. These in-store relationships are being optimized for speed and efficiency, with investments aimed at improving checkout speed and in-stock rates. The underlying health of the core retail business is evidenced by the 2.6% increase in identical sales without fuel for the third quarter of 2025. This suggests that the majority of customers still engage in high-volume, self-service transactions.

Mass communication through weekly circulars and digital promotions

Mass communication is evolving to ensure savings are accessible to all loyalty members, regardless of digital fluency. In July 2025, The Kroger Co. launched printed 'Weekly Digital Deals' flyers at store entrances. This initiative allows customers with a Kroger loyalty card to scan a barcode from the physical flyer to load all the associated digital deals onto their account, directly addressing concerns about the digital divide. The digital weekly ad is typically available on Tuesdays on the website and app. The company is also shifting its advertising strategy, with ads for subsidiaries like Ralphs and Fred Meyer expected to shift online, though printed copies remain available in stores.

• Digital weekly ad available on Tuesdays.
• Printed 'Weekly Digital Deals' flyers introduced in July 2025 to load digital coupons.
• Digital coupons can be clipped up to 150 times.

Finance: draft 13-week cash view by Friday.

The Kroger Co. (KR) - Canvas Business Model: Channels

You're looking at how The Kroger Co. gets its products into the hands of customers as of late 2025. It's a mix of old-school brick-and-mortar strength and aggressive digital adaptation. Honestly, the numbers show a clear pivot toward flexibility in how they deliver.

Physical Supermarkets: The core channel, operating under various local banners

The foundation remains the physical store footprint. As of February 1, 2025, The Kroger Co. operated approximately 2,731 supermarkets across 35 states and the District of Columbia. These stores operate under various banners, each maintaining strong local ties and brand recognition. Private label items, a key part of the in-store value proposition, represented over $32 billion of sales in 2024.

Fuel Centers: Located adjacent to many stores

Fuel centers are explicitly part of The Kroger Co.'s strategy to build customer loyalty via the Kroger Plus fuel rewards program. As of February 1, 2025, 1,702 of the company's supermarkets had fuel centers. Fuel sales remain an important component of both revenue and net earnings.

Digital Platforms: Kroger.com and mobile app for ordering

The digital ecosystem is growing fast, outpacing overall sales growth. In the third quarter of 2025, eCommerce sales increased by 17% year-over-year. This digital momentum is a core part of the strategy to achieve e-commerce profitability in 2026. The company provides interfaces that aim for a seamless customer experience across both store and digital channels.

In-Store Pickup: ClickList/Kroger Pickup service

The Pickup service, formerly known as ClickList, is central to the hybrid fulfillment model, leveraging the existing store network. This service saw a direct reflection in customer behavior; short visits to stores (under 10 minutes) were up 5.0% in Q3 2025, signaling rising shopper appetite for curbside pickup. To encourage use, Pickup is offered free on orders of $35 or more.

Third-Party Delivery: Instacart, DoorDash, and Uber Eats marketplaces

The Kroger Co. is leaning heavily on established third-party platforms to boost speed and geographic coverage. The company is expanding relationships with Instacart, DoorDash, and Uber Eats. Instacart has been reaffirmed as the primary delivery fulfillment partner. This partnership strategy is designed to help The Kroger Co. reach new customers in as little as 30 minutes. These arrangements are expected to contribute approximately $400 million in incremental e-commerce operating profit in 2026.

Here's a quick look at the Q3 2025 context for these channels:

The company is using its store network to fulfill online orders, which keeps inventory closer to customers and lowers last-mile delivery costs.

• The Kroger Co. operates approximately 2,731 supermarkets.
• 1,702 of those supermarkets have fuel centers.
• Pickup service requires a minimum order of $35 for free service.
• The company is closing three robotic fulfillment centers, taking a charge of $2.6 billion against third-quarter earnings.
• The goal is to make the e-commerce business profitable in 2026.

Finance: draft 13-week cash view by Friday.

The Kroger Co. (KR) - Canvas Business Model: Customer Segments

The Kroger Co. targets a broad consumer base across its family of companies, serving over 11 million customers daily through its various banner names and digital channels.

Mass Market Consumers: Families and individuals seeking value and convenience

This segment represents the core of The Kroger Co.'s operations, focusing on shoppers who value a one-stop grocery experience.

The Kroger Co. receives around 16% of total U.S. grocery visits when excluding non-traditional grocers such as superstores and wholesale clubs.

For the full fiscal year 2025, The Kroger Co. narrowed its guidance for identical sales growth, excluding fuel, to a range between 2.8% and 3.0%.

The company's overall financial outlook for 2025 includes an expected Adjusted Earnings Per Share (EPS) guidance range of $4.75 to $4.80.

Loyalty Program Members: High-frequency shoppers driven by personalized discounts

The Kroger Plus loyalty program is central to retaining these high-frequency shoppers, often involving fuel rewards.

The paid membership tier, Boost by The Kroger Co. Plus, offers benefits like free delivery and double fuel points, with annual costs set at $59 and $99.

In the program's inaugural year, Boost by The Kroger Co. Plus members saved more than $115 million.

Data gathered from this segment fuels significant alternative profit ventures; the precision marketing arm generated an estimated $527 million last year (2024), which accounted for more than 35% of The Kroger Co.'s net income.

The Kroger Co. uses this data to tailor offers:

• Digital coupons tailored just for you.
• Discounts at the pump.
• Product recall notifications.

Digital Shoppers: Urban and suburban customers prioritizing speed and delivery

This segment is characterized by demand for speed and flexibility in their shopping methods.

In the third quarter of fiscal 2025, The Kroger Co.'s eCommerce sales increased by 17% year-over-year, led by delivery.

The company expects its eCommerce business to achieve profitability in 2026, anticipating $400 million in incremental e-commerce operating profit from strategic changes, such as closing three automated fulfillment centers.

Total company sales for the third quarter of 2025 were reported at $33.9 billion.

The Kroger Co. is meeting digital needs by leveraging store-based fulfillment and partnerships with third-party delivery companies.

Health-Conscious Consumers: Targeted by the Simple Truth brand

The Kroger Co. targets consumers interested in healthier and organic options through its private label portfolio.

The premium lines, Simple Truth and Private Selection, outperformed national brands and contributed to improved profitability in the third quarter of 2025.

The entire Our Brands private label portfolio achieved annual sales of over $32 billion in 2024.

In 2024, over 90% of The Kroger Co.'s customer households purchased products from its private label offerings.

To attract value-seeking shoppers who still desire quality, The Kroger Co. is cutting prices on more than 3,500 grocery items this year, including Simple Truth products.

The Kroger Co. is also introducing new affordable Our Brands products, with a goal to introduce 900+ new items by 2025.

The Kroger Co. (KR) - Canvas Business Model: Cost Structure

The Cost Structure for The Kroger Co. (KR) is heavily weighted toward the cost of goods sold, followed by significant operational and strategic technology outlays. You're looking at a model where inventory acquisition is the single largest drain on cash flow.

Merchandise Costs: The largest component, covering inventory and procurement

Merchandise Costs, or Cost of Goods Sold (COGS), form the base of the expense structure. The definition of FIFO gross profit explicitly includes merchandise costs, along with advertising, warehousing, and transportation expenses. For the third quarter of 2025, the reported Inventory balance stood at $7,714 million. For the fiscal quarter ending June of 2025, the Cost of Sales was reported as $26.91B. The company noted that LIFO charges, which adjust COGS, were $44 million for the third quarter of 2025.

Operating Expenses: High associate wages and benefits

Total annual operating expenses for The Kroger Co. in 2025 were reported at $143.274B. The Operating, General and Administrative (OG&A) rate, when excluding fuel and adjustment items, increased by 27 basis points in the third quarter of 2025 compared to the prior year. This increase was primarily attributed to investments in associate wages and benefits, alongside the impact of the sale of Kroger Specialty Pharmacy.

The key cost components and capital deployment figures for fiscal 2025 are summarized below:

Capital Expenditures: Projected at $3.6 billion to $3.8 billion for 2025

The Kroger Co. projected its capital expenditures for the full year 2025 to fall within the range of $3.6 billion to $3.8 billion. Management indicated that capital previously allocated to the fulfillment centers is now being re-evaluated, with plans to accelerate investment in new stores going forward.

Impairment Charges: A $2.6 billion charge in Q3 2025 for automated fulfillment network

A significant, non-cash cost hit the income statement in the third quarter of 2025. The Kroger Co. recorded an impairment and related charge of approximately $2.6 billion. This charge stemmed directly from the financial performance of the automated fulfillment network and the decision to close specific facilities, such as those in Pleasant Prairie, Wisconsin; Frederick, Maryland; and Groveland, Florida.

Technology and Digital Investment: Costs related to e-commerce and AI partnerships

Digital transformation remains a major cost driver, though the strategy is pivoting. The overall CapEx budget is being directed to support this shift. Key technology investments and related costs include:

• Partnerships with technology leaders like Google Cloud, Ocado, and Nvidia.
• A $152 million credit facility from Ocado Group to accelerate the rollout of Customer Fulfillment Centers.
• Focus on deploying Artificial Intelligence (AI) use cases for efficiency and pricing.
• The strategic shift is expected to yield an estimated positive effect of approximately $400 million to e-commerce operating profit in 2026.

Finance: draft 13-week cash view by Friday.

The Kroger Co. (KR) - Canvas Business Model: Revenue Streams

You're looking at how The Kroger Co. (KR) actually brings in the money, focusing on the numbers that define its streams as of late 2025. This isn't about strategy; it's about the dollars and cents flowing in.

The primary revenue driver remains the physical and digital sale of groceries and general merchandise. For the third quarter of fiscal 2025, total company sales hit $33.9 billion. This is the top-line number for the core business, though it's important to note the underlying health is often seen in the identical sales metric, which excludes fuel. For that same third quarter, identical sales without fuel grew by 2.7% year-over-year.

The Kroger Co. (KR) also generates significant revenue from specialized services that are integrated into the store experience, namely pharmacy and fuel.

• Pharmacy Services revenue, which includes prescription and over-the-counter sales, contributed $387 million to total company sales in the third quarter of fiscal 2025.
• Fuel sales revenue is tracked indirectly, as the company reports identical sales growth excluding this component to better gauge core retail performance.

The high-margin advertising stream, Kroger Precision Marketing (KPM), is a growing component, leveraging the loyalty program data. While specific 2025 revenue for KPM isn't explicitly stated in the latest reports, the scale of its contribution from the prior year gives you a solid benchmark for this high-margin stream. For the full fiscal year 2024, the media business saw a 17% increase and contributed $1.35 billion in operating profit from alternative profit businesses. Digital sales, which feed into KPM, surpassed $13 billion in fiscal 2024, with projections for 2025 online sales reaching $19.98 billion.

Here's a quick look at how the key revenue-related financial metrics stack up against the latest guidance:

The company is definitely focused on driving profitability, as shown by the upward revision in the earnings outlook, even if total sales growth is modest. If onboarding takes 14+ days, churn risk rises, but for The Kroger Co. (KR), the focus is on making sure those high-margin digital and media dollars keep growing faster than the core grocery business. Finance: draft 13-week cash view by Friday.